Wirecard and the missing €1.9bn: my story

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I mean to begin with it was hard to believe. You have a sense of the Financial Times as a reputed organisation. And you’re very publicly being called a criminal. I was sort of used to it when the company had done it, because the company had done it for years.

But when you suddenly find yourself facing an actual criminal investigation in Germany, with regulators where the company which you’re writing about seems to have certainly the ear of these people, that was – there were some moments where it was quite stressful. You do at times start to think that you’re going a little bit mad.

Because obviously you become paranoid. If you constantly think your emails are going to be hacked, or if you think people are following you. There was a period where I started to double back when I was going to meet people, or you would get on a Tube carriage, and jump off again, which seems ridiculous.

And it seemed ridiculous at the time. We were very conscious that there was active surveillance going on. So you start to doubt yourself. And when you try and explain this to anyone as well, like yes, I’m trying to report on the company. And all this crazy stuff is happening.

Even now I think about it, it sounds ridiculous. Like, some sort of film. My name is Dan McCrum. I’m a member of the investigations team at the Financial Times. Wirecard was pretty much a little known technology company. Barely anyone had heard of it, and even fewer people really understood what it did.

And at the time the general thrust of it was this is a bit of a strange company, and the numbers that it’s putting out don’t quite seem to add up. Wirecard is a payment processor. And what it does is when you go online, and you buy something you give them your credit card details. And those details go off to Wirecard, and it deals with the issuing banks who issue your credit card, or your debit card, and it collects all the money from those people for the purchases.

And then it will sort it through its systems to make sure that ultimately the money ends up in the merchant, as it’s known in the industry. They get the money in their account eventually. And to be honest, it’s pretty simple business. Lots of people are trying to do it. And Wirecard’s promise for a long time was they had some of the best technology, and it was doing all these advanced things around payment processing that was allowing it to grow much faster than everybody else in the industry.

And also, to make more money doing that than everybody else in the industry. And as it was doing this it was expanding all over the world. And so, it was growing very quickly. And it kept preaching this mantra that it was part of the shift to a cashless society. We wouldn’t use notes or coins any more. And this was going to lead it to more and more growth, and make it ever and ever bigger.

So what Wirecard was doing was it was processing all these payments around the world. But what appears to have happened was part of its business seems got very large, which was purely invented. So Wirecard had these businesses based in Dublin, in Germany, and Dubai. Wirecard would say in the countries where it didn’t have its own licences to process payments it would use these third parties.

And it had three partner companies which were doing all of this business. And again these were based mainly in Dubai, was the one which we wrote a lot about last year. Because it seemed like the customers didn’t really exist. And then there was another one in the Philippines, which shared an office with a bus company.

And then there was another one in Singapore. And so what Wirecard appears to have convinced its auditors was going on was that it was sending lots of payments processing to these businesses. And then they were doing it for them and paying Wirecard a nice, big commission. The problem when you have a structure, or you have a fraud, is where’s the cash?

If you’re reporting lots of profits then there should be lots of cash flowing from them. And what seems to have happened is Wirecard said the cash wasn’t actually going into its accounts. Now, Wirecard is a big financial institution. It actually owns a Munich bank. But instead of the cash flowing into its Munich bank it said the cash was going into these special sorts of accounts called escrow accounts.

That’s where you have an account and multiple people can use it. And you have a trustee who oversees it and says OK, you can have that money, or you have that money from the account. So Wirecard convinced its auditors that there was very large amounts of money sitting in these accounts. At the end of last year they told them there was 1.9bn euros of cash in them.

But then what has transpired in recent weeks was that Wirecard has these businesses in Ireland, and Dubai, and Germany, which were supposedly using these accounts. But all the money was in the Philippines. So when EY went to check with the banks to say is that money really there, they turned around and said we’ve got no idea what you’re talking about.

These documents that you’ve shown us are completely spurious. So it seems that a very large part of what appears to be a fraud is they were claiming that there was money there which just simply didn’t exist. So Wirecard has been quite unlike any other company that I’ve ever encountered, or certainly my colleagues at the FT have encountered, to report on over these last few years.

They used a lot of very aggressive lawyers. But they also had a certain standard set of tactics. So whenever they encountered criticism their standard playbook would be to say this is an attempt to manipulate our share price. It’s completely unfounded.

You guys are colluding, and there’s nothing to it. And so when the FT was trying to report on this and just raised questions about the accounts, Wirecard’s response would be you’re just doing the work of short sellers. And then this escalated very sharply in January last year. So when the FT started to publish whistleblower allegations, beginning initially in the Singapore office, that Wirecard staff were cooking the books, to put it simply.

And so Wirecard turned round and said the FT had leaked its story in advance to hedge funds, and that it was a blatant attempt to manipulate the share price again. Now of course, there’s no truth to this whatsoever. This was entirely self-serving. But it seems to have convinced the German regulators sufficiently that they began to investigate me, and my colleague Stefania Palma, who wrote the first Wirecard stories with me as well.

So on the day that Wirecard announced 1.9bn euros was missing, and that it wasn’t going to announce its full-year results as it had promised, Wirecard held a short video, which it put out late at night from its management board. At that point Jan Marsalek, the chief operating officer, had been sduspended.

So you had Susanne Steidl, Markus Braun, and Alexander von Knoop. And they also introduced the new compliance officer, who had been due to join in the start of July. But they had rushed forward his appointment slightly. And he’s interesting, because he’s a man who joins as compliance officer on the Thursday, and suddenly on the Friday finds himself being appointed interim chief executive when Markus Braun resigns.

What do you think he’s thinking?

I imagine he is thinking he has got himself a little more than he bargained for. I imagined the remit was to come in and beef up compliance at a financial institution which had faced a lot of criticism and scrutiny. And you know required a tightening of procedures, and things like that. And certainly, he will have read the KPMG report, which talked about things like contracts not being signed, minutes not being kept at meetings.

But I imagine he wouldn’t have expected to walk in and suddenly find himself running a company which, if the lenders don’t agree to extend terms on their loans, would imminently be going bust. So he was plunged into quite a difficult situation, I imagine.

I mean, I certainly think we are talking about one of the largest accounting frauds in German postwar history. Certainly one of Europe’s largest frauds. That was worth 24bn at the peak, and now is worth very considerably less than that. This is by far the biggest story of my career. It certainly, with all its twists, and turns, and intrigue, is the wildest story I have ever worked on.

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